BlueBay sees buying opportunity in Japan AI stocks

RBC BlueBay Asset Management expects a near-term pullback in Japan’s artificial intelligence-linked stocks as investors take profits after a sharp rise in valuations. The firm views any weakness as a buying opportunity and forecasts the sector to resume a rally into 2027.

Portfolio managers at BlueBay warned the recent surge in AI-related shares has left parts of the market vulnerable to a short-term correction. They identified profit-taking as the most likely trigger while noting longer-term drivers remain in place, such as demand for AI infrastructure and potential earnings growth among suppliers to data centres.

Japanese equities have been among the best-performing markets this year. The rally has broadened beyond semiconductor equipment makers to include component manufacturers and power infrastructure companies that service AI data centres. BlueBay noted wider participation occurred even as price-to-earnings ratios climbed in parts of the sector.

BlueBay acknowledged the risk of a near-term consolidation in names with stretched valuations. The firm expects prices to reset during any pullback and predicted renewed upside once valuation levels adjust.

The asset manager highlighted structural factors that support its outlook: rising investment in AI-capable data centres, growing demand for specialized components and power solutions, and the potential for continued revenue and profit gains among suppliers to the AI ecosystem. Based on those factors, the firm recommends adding exposure on dips rather than exiting positions.

BlueBay set a multi-year investment horizon for recovery and further gains, forecasting that after a period of weakness the sector should resume an upward trajectory into 2027. The guidance frames the recent selloff as a point at which long-term investors might consider increasing allocation to Japan’s AI-linked companies.